Iran, US agree to halt war and reopen Hormuz, sending oil prices tumbling

Highlights

• Trump says deal includes reopening Strait of Hormuz
• MOU announced despite Israeli attack in Lebanon
• Iran's nuclear programme to be subject of later talks
• Oil prices fall more than 4%, stocks advance

US and Iranian officials said they had reached an agreement to end their war and reopen the Strait of Hormuz, a preliminary pact that sent oil prices falling but leaves the fate of Tehran's nuclear programme to further negotiations.

While still a framework, the deal marked the biggest breakthrough towards resolving the conflict that has killed thousands and upended energy markets since it began with joint US-Israeli strikes on Iran in February.

The "Deal with the Islamic Republic of Iran is now complete", US President Donald Trump wrote on his Truth Social platform at around 5:30 pm in Washington (2130 GMT) on Sunday. His post came shortly after Pakistani Prime Minister Shehbaz Sharif, whose country has served as a mediator, announced a deal had been struck early on Monday local time.

The memorandum of understanding is scheduled to be officially signed on Friday in Switzerland.

The precise terms were not immediately known. Sharif said in a post on X that the pact called for "the immediate and permanent termination of military operations on all fronts, including in Lebanon".

Lebanon has been a sticking point in negotiations, with Israel and Hezbollah ignoring calls from Trump and others to stop their attacks on each other in recent weeks.

In a statement, the secretariat of Iran's Supreme National Security Council said war and military operations on all fronts, including Lebanon, would end permanently starting on Monday night.

Iran's deputy foreign minister, Kazem Gharibabadi, said a more expansive agreement would be negotiated during a 60-day ceasefire period, including sanctions relief for Iran.

The fate of Iran's nuclear programme, another thorny issue, will also be addressed in those later talks, sources previously told Reuters.

There was no immediate reaction to the announcement from Israel, which has said it was not party to the US-Iran talks.

Strait to reopen

Trump said the Strait of Hormuz, a major shipping route for global oil and gas supplies that Iran has effectively shut down for months, would open on Friday, and that he had ordered the end of the US blockade of Iranian ports.

"Ships of the world, start your engines. Let the oil flow!" Trump wrote.

Oil prices fell on the news. Brent crude futures fell 4% in early trading on Monday while stock markets in Asia jumped.

"The lack of details especially on freedom of shipping is a concern but not one that should constrain markets today as the surge in risk appetite plays out," said Sean Callow, a senior FX analyst at ITC Markets.

Former Biden administration State Department spokesperson Matthew Miller said Trump had made important concessions to Iran to achieve the status quo that existed before he launched the war.

"We have no assurances the nuclear programme will ever be addressed, but Iran has shown the world it can take the global economy hostage and get something from the US in return," said Miller.

Thousands of people have been killed, mostly in Iran and Lebanon, since US and Israeli forces first attacked Iran on 28 February. Iran has struck Israel and Gulf states hosting US bases and has effectively blockaded the Strait of Hormuz, pushing up global energy prices. US forces have blocked Iranian ports in response.

The war has become a political liability at home for Trump and his fellow Republicans in Congress, with public opinion polls showing Americans deeply frustrated by rising gas prices ahead of November's midterm elections. But Trump has also faced pressure from members of his own party who insist that Iran's nuclear programme must be completely shut down.

Republican Senator Lindsey Graham, a leading Iran hawk, praised the deal but said he would be "watching closely" the coming negotiations on Iran's nuclear programme.

"Under our law, any nuclear deal with Iran will be sent to Congress for review and a vote," he said. "Congratulations to all in getting us to this point."

During his first term, Trump withdrew the US from a 2015 multilateral Iran deal, negotiated by Democratic President Barack Obama, that lifted sanctions on Tehran in exchange for limits on its nuclear programme, including international inspections.

Iran responded by ramping up its enrichment of uranium, producing more than 400 kg (around 900 pounds) of material at close to bomb-grade purity. The eventual fate of that uranium is likely to be a key negotiating point during the upcoming talks.

A very difficult guy

The agreement was sealed despite an Israeli strike on Lebanon on Sunday that drew criticism from both Iran and Trump.

Prime Minister Benjamin Netanyahu has differed with Trump over American demands that Israel curb its military action in Lebanon to allow the United States to reach a deal with Iran.

Israel has said it will retain freedom of operations in Lebanon, while Iran has made a full ceasefire there an important component of its demands.

Trump updated Netanyahu on the progress towards a peace deal during a phone call on Sunday, Israel's N12 reported, citing a senior official.

In an interview with the New York Times, Trump called Netanyahu "a very difficult guy" and argued the Israeli leader should thank him for saving Israel from a nuclear-armed Iran.

Leaders outside the Middle East, who have kept a wary eye on the conflict, welcomed the announcement.

In a joint statement, Britain, Germany, France and Italy said they were prepared to lift sanctions on Iran in response to "clear, verifiable steps" to limit its nuclear programme.

"We are clear that toll-free freedom of navigation must now be restored in the Strait of Hormuz," British Prime Minister Keir Starmer said. "Iran must never have a nuclear weapon."

Before the deal was announced, a senior Iranian official told Reuters that, under the terms of the draft, the United States would agree to release $25 billion of frozen Iranian assets. The Trump administration has previously said any release of Iranian money would only take place once Iran has fulfilled certain conditions under a peace deal.

A US official, also speaking before the announcement, said the agreement would ultimately lead to the dismantling of Iran's nuclear programme, with its stockpile of highly enriched uranium to be destroyed and removed. The senior Iranian official said the draft deal would allow Iran, which denies seeking a nuclear bomb, to dilute its enriched uranium inside the country.